Budget 2023 aims to reposition Singapore’s resilience for a new era

By Ong Pang Thye, Managing Partner, KPMG in Singapore

Singapore’s Budget 2023 comes at a pivotal moment, as the country adapts to secure a promising future amid global challenges. The plans announced by Deputy Prime Minister and Minister for Finance Lawrence Wong will chart paths to create resilience for our continuing prosperity in a changing world.  

Many of these measures are in line with KPMG’s recommendations for this year’s Budget, focused on areas including retooling our economy for resilience, doubling down on innovation for competitiveness, and providing continued focus on sustainability.

Crucially, this Budget also focuses strongly on strengthening Singapore’s social compact. The government is boosting social spending and enhancing social mobility, while maintaining a fair and efficient tax system.

Notably, the further S$3 billion announced for the one-off Goods and Service Tax (GST) Assurance Package and the enhancement to the Permanent GST Voucher scheme will help Singaporeans, especially lower income households, cover rising living costs and increased GST expenses.

A further raft of policies to support young families and seniors will help to create a fairer society. Growing the Singapore economy will be vital to ensuring that the funds for such spending continue to flow.  

Resilience, innovation and productivity of Singapore enterprises and Singaporeans are the key impetus of the announced measures. The extensions to the Enterprise Financing Scheme and the Energy Efficiency Grant until March 2024 act as cost reducing and anti-inflation measures and demonstrate the government’s continued commitment to supporting Singapore-based SMEs and promoting sustainability.

Bolstering competitiveness via innovation will be a key differentiator in the new global economic reality.

Businesses will welcome the government’s creation of the new Enterprise Innovation Scheme that increases tax deductions of 400 per cent of costs incurred for eligible activities – including Singapore-based research and development and intellectual property registration.

A S$1 billion boost to the Singapore Global Enterprises initiative and S$150 million more for the SME Co-Investment Fund will also help companies remain agile as they battle to secure both talent and customers.

Keeping the talent pipeline flowing will also power local enterprises’ next wave of growth. CEOs will welcome the introduction of Jobs-Skills Integrators to help optimise training and job placements. This will support reskilling to address structural unemployment while at the same time optimising use of human capital.

Offering wage support for seniors and ex-offenders will help supplement the job pool. While these schemes are helpful, it will take some time to fill the skill and talent gap, and as such Singapore should remain open to allow foreign talents in targeted sectors. 

While strengthening the country’s resilience and competitiveness, the government may also look to continue capturing opportunities in the green economy over the longer term.

The extension of the Energy Efficiency Grant to 2024 will help SMEs to cut their emissions, and this grant could be further extended to take Singapore further in its transition to a green economy. Fiscal policies to enhance support for greening of our building stock would also be beneficial for the boosting nation’s sustainability efforts. Another future area to watch will be promised significant increases in climate spending in the medium term – including for adaptation measures such as coastal and flood protection. This will create new opportunities in the infrastructure sector.

Importantly, as this budget sets Singapore’s path to more inclusive growth, it will be key to balance taxation for social spending with preserving a thriving economic environment. Government spending is projected to rise to about up to 20 percent of GDP in FY2026-2030, driven by healthcare and infrastructure spending, according to the Ministry of Finance.

As it looks to fund new initiatives, Singapore will also need to ensure its position as a jurisdiction where enterprises can thrive. This includes preserving the country’s attractiveness as a destination for multinational enterprises (MNEs), especially with the announcement that the government will introduce a 15 percent minimum effective tax rate for MNEs in 2025 in line with new global tax rules. The extra S$4 billion for Singapore’s National Productivity Fund and expansion of its scope to include investment promotion will help maintain a business ecosystem that is attractive to foreign investment.

In turn, this will create new opportunities for Singapore’s people. The results of the Forward Singapore consultation will be reported later this year and this Budget foreshadows some key approaches. Creation and extension of employment support for seniors, people with disabilities and ex-offenders also mark major investments to create an economy that works for all. Increased funds for the Enhanced CPF Housing Grants for families, the Working Mothers' Child Relief, the Baby Bonus Cash Gift and Child Development Accounts will also help support Singapore families – along with extended paternity and parental leave.

Budget 2023 demonstrates Singapore’s ambitions to chart new paths on various fronts–including on sustainable growth, social mobility and business transformation. Today’s announcements promise to set us in the right direction for a bright future in an uncertain world.